How a $1 Bag of Salt Water Becomes a $546 Bill at Hospitals

Much like every other aspect of the U.S. ponzi economy, the healthcare system is one gigantic centralized oligopolistic racket. The New York Times has done some excellent coverage on this topic as of late, most recently in an article I highlighted earlier this month about how Americans are now finding themselves forced to travel overseas for surgery.

That article demonstrated how the medical industry is simply one huge convoluted racket, in which contracts are secret and no one has any clue about anything except for a small group of players involved. In fact, it reminds me of an incredible article from 1982 that explains how diamonds are actually basically worthless, and that the whole market is a gigantic con. You take something that is essentially free, and then charge a fortune for it through middleman markups.

It is one of the most common components of emergency medicine: an intravenous bag of sterile saltwater.

Luckily for anyone who has ever needed an IV bag to replenish lost fluids or to receive medication, it is also one of the least expensive. The average manufacturer’s price, according to government data, has fluctuated in recent years from 44 cents to $1.

Yet there is nothing either cheap or simple about its ultimate cost, as I learned when I tried to trace the commercial path of IV bags from the factory to the veins of more than 100 patients struck by a May 2012 outbreak of food poisoning in upstate New York.

Some of the patients’ bills would later include markups of 100 to 200 times the manufacturer’s price, not counting separate charges for “IV administration.” And on other bills, a bundled charge for “IV therapy” was almost 1,000 times the official cost of the solution.

It is no secret that medical care in the United States is overpriced. But as the tale of the humble IV bag shows all too clearly, it is secrecy that helps keep prices high: hidden in the underbrush of transactions among multiple buyers and sellers, and in the hieroglyphics of hospital bills.

At every step from manufacturer to patient, there are confidential deals among the major players, including drug companies, purchasing organizations and distributors, and insurers. These deals so obscure prices and profits that even participants cannot say what the simplest component of care actually costs, let alone what it should cost.

And that leaves taxpayers and patients alike with an inflated bottom line and little or no way to challenge it.

But even before the finished product is sold by the case or the truckload, the real cost of a bag of normal saline, like the true cost of medical supplies from gauze to heart implants, disappears into an opaque realm of byzantine contracts, confidential rebates and fees that would be considered illegal kickbacks in many other industries.

The top three group-purchasing organizations now handle contracts for more than half of all institutional medical supplies sold in the United States, including the IVs used in the food-poisoning case, which were bought and taken by truck to regional warehouses by big distributors.

Dr. Frost, the anesthesiologist, spent three days in the same hospital and owed only $8, thanks to insurance coverage by United HealthCare. Still, she was baffled by the charges: $6,844, including $546 for six liters of saline that cost the hospital $5.16.

“It’s just absolutely absurd.” she said. “That’s saltwater.”

Last fall, I appealed to the New York State Department of Health for help in mapping the charges for rehydrating patients in the food poisoning episode. Deploying software normally used to detect Medicaid fraud, a team compiled a chart of what Medicaid and Medicare were billed in six of the cases.

But the department has yet to release the chart. It is under indefinite review, Bill Schwarz, a department spokesman, said, “to ensure confidential information is not compromised.”

5 Comments

The problem is that most people are inclined to respond this crap with, “the govt needs to do something!”, or “the govt should set/force prices”, etc. Something even close to a free market is the answer, of course.

And the government tried to go after oil companies because they were making 3 cents a gallon on gas. The next time someone who works in a hospital wants to buy a bottle of water they should be charged $546.00

Mike
I’ve been an RN and have worked in hospitals for over 25 years now. How do you think these place make money to pay for all the staff it takes to run the business? I know the mark up is crazy, but I sure don’t want to be making minimum wage for what I do. With my talent, knowledge and skill, my nursing license is a ticket to almost anywhere I want to work because it is a needed and valuable profession. I have worked in other countries as an RN and the mark up on there supplies is just as bad. I guess it’s just a fact of life today. Gary A. RN